January 24, 2006

  

A Publication of the Economic Development Corporation of Utah

 PRESIDENT'S MESSAGE

 HB131: Blended Incentives



An important purpose of the Economic Review is to keep our members and partners in economic development informed about relevant legislative issues sure to impact statewide ED efforts. Today’s feature article discusses HB131, a proposal to allow the blending of two of the state’s key economic incentive programs in an effort to make them more flexible and make Utah even more competitive. Business incentives are always a hot topic on Capitol Hill, so we will be interested to see the progress of this legislation.

Today’s Economic Review also includes links to many of the ED-related news stories from the past week. As always, if you have comments, suggestions or topics you’d like to see in the Economic Review, please contact us by clicking the “Comments” button on the bottom of this page.

Enjoy!

Jeff Edwards
Jeff Edwards
President and CEO

FEATURE STORY

EDCUTAH Legislative Priority #3: HB131


Utah is rich in what we call natural economic incentives: a highly educated, skilled workforce; quality of life; lower utility rates; access to transportation and convenient air travel connections; etc. With regard to financial incentives, however, Utah is hamstrung by its inability to creatively structure its financial incentives to meet the needs of ED prospects. Our competitiveness is not weakened by a lack of incentives, but rather from inflexibility within the incentive structure.

Currently Utah’s main sources of ED incentives come from the Industrial Assistance Fund (IAF), a job-creation incentive, and HB11, a post-performance incremental tax rebate that returns a portion of state tax revenues back to the company. HB11 and IAF are both extremely powerful, useful tools that strength our competitiveness. However, these incentives are limited to essentially “either/or” situations. The legislation that created HB11 prohibits combining it with other state incentives, such as the Industrial Assistance Fund.

EDCUTAH believes the proposed HB131, sponsored by Sen. Sheldon Killpack and Rep. Brad Dee, is an important step toward more creative use of financial incentives. HB131 would strengthen our competitiveness by allowing economic developers to blend HB11 with other state incentives.
 

Economic Development Incentive Deals in 2005
Deals:  15
# Involving a Headquarters Move:  5-6
# of Jobs Involved:  4,195
Approx. New State Revenue:
(over 10 years)		  $121,078,500
Total Tax Rebate Incentives:  $22,796,350
Total IAF Incentives:  $990,000

For example, EDCUTAH recently courted a manufacturing company that was interested in the tax rebate through the Economic Development Tax Increment Fund (EDTIF), but also wanted cash assistance to help relocate its corporate office. By blending the IAF and EDTIF incentives, economic developers could structure the incentive package so that the manufacturing company received cash assistance for headquarters relocation expenses, but less in EDTIF money for the manufacturing plant and those jobs.

Let’s say the manufacturing company qualified for a 30% tax rebate of $3,300,000 over 10 years using the EDTIF, but also wanted $150,000 to off-set the moving expenses of its corporate headquarters to Utah. Under the proposed HB131, the state (with the GOED Board Approval) could use the Industrial Assistance Fund to provide the company with the cash reimbursement of the $150,000 (only after incurring the expense and establishing its headquarters in Utah) and still qualify for a tax rebate under EDTIF. However, the EDTIF amount would be reduced by $150,000 so that the total EDTIF rebate provided over 10 years would equal the original $3,300,000 for which the company qualified.

Michael Nelson, GOED’s director of recruitment and incentives, says double dipping would be prevented by using the same analysis to determine the amount of incentive, whether a single source or multiple-source incentive is provided. “Under no circumstances will more incentive be provided with a multiple source incentive than with a single source incentive.”

Furthermore, the GOED board makes all funding decisions based upon established formulas, after complete financial and business analysis. Decision factors include location (rural or urban), impact on the community, wages paid, benefits paid, number of jobs created, types of jobs created, and capital investment the company will make in the area.

Ultimately, Utah must become more creative in its use of incentives to attract business to the state. HB131 would allow the state to structure incentive packages to the needs of its prospects, and allow economic developers to be more aggressive in their recruitment efforts. Combining creative financial incentives with our rich supply of natural incentives would allow the state to greatly distinguish itself from the competition.

The overall integration of all of our economic development strategies is what makes Utah a strong, competitive player among states that may have more money or other individual advantages, but fail to integrate all of the tools necessary to attract companies.

CALENDAR

Jan. 23-26:  Snowsports Industries America (SIA) Trade Show (Las Vegas)

Jan. 27:  GOED “Increase Your Profits in Mexico” Seminar, 8:30 a.m. - 1:00 p.m.

Jan. 27:  GOED Tech Breakfast, 7:30 a.m. - 9:00 a.m.

Feb. 10-12:  EDCUTAH Site Consultant Event (Park City)

March 8-9:  Big Business and Technology Expo (Orem)

April 6-7:  Utah League of Cities and Towns Spring Convention (St. George)

April 9-12:  BIO 2006 Annual Conference (Chicago)

April 23-26:  CoreNet Global Summit Spring Convention (Philadelphia)

May 3-4:  Salt Lake Chamber Business-to-Business Expo

May 21-24:  ICSC Spring Convention (Las Vegas)


EDCUTAH PARTNERS


Current Partners
Why Be a Partner?
 Board of Trustees

IN THE NEWS

Economic Development Headlines

USTAR Update

SB75, the USTAR bill sponsored by Sen. Al Mansell, is now available for public review. Click here to view SB75 status updates and links to the complete text. Mansell's bill outlines USTAR governance and such things as royalty arrangements, etc.  The USTAR bill will be heard Friday in the Senate Workforce Services and Community and Economic Development Committee, at 2 pm in Room W015.

KSL Editorial: Fund USTAR

"In his forward-looking State of the State address Tuesday, Governor Jon Huntsman enthusiastically endorsed USTAR, the visionary Utah Science, Technology and Research Economic Development Initiative.

"KSL shares the vision and likewise encourages lawmakers to approve a funding package that promises to pay unprecedented dividends in coming years.

"It sounds like a lot of money, and it is:  $25 million in ongoing annual funding to support research teams at Utah State and the University of Utah; $250 million for infrastructure support, which includes a couple of buildings at the universities; $3 million in ongoing funding to support business innovation outreach centers around the state.

"In KSL’s view, it would be money well-spent." (KSL)

Standard-Examiner Endorses USTAR

"The stakes of this game are plain to see: Utah is in an economic dogfight with our neighbors. Arizona has invested $650 million in a similar project. Colorado's total investment is $4 billion-plus. California is spending $4 billion on stem-cell research alone.

"If Utah is to regain its innovative footing and produce high-paying jobs, USTAR is absolutely necessary -- as long as it's done in a way that protects our investment." (Standard-Examiner)

Where the Utah Jobs Are

- 37,000 positions expected to be added in the state this year. Coming off a record year in 2005, the construction industry is expected again this year to be the star of the Utah job market. However, some contractors, already dealing with shortages of cement and other building materials, are finding labor to be in short supply... (Standard-Examiner) (Morning News)

Economic Board Defines Incentives Given

- A state agency approved two financial incentives for economic development and also took a few minutes to clarify just how much information is available to the public when incentives are being considered or awarded. (Morning News)

Airport Sees Surge in Travelers

- Dallas' loss was Salt Lake City's gain. The Texas city lost its status as a Delta hub early in 2005, and Utah's capital gained nearly 4 million passengers throughout last year from the airline's restructuring. Those extra passengers pushed Salt Lake International Airport's load to 22.2 million people in 2005 — its highest number ever and more than a 20 percent increase over 2004. (Morning News)

South of the Border Cement

- Gov. Jon M. Huntsman, Jr. commended the U.S. Department of Commerce decision to end a 16-year impasse with Mexico regarding cement trade, opening the U.S. market back up to cement from south of the border. (Utah Business Magazine)

Ogden City Promotes Itself at Snow Sport Show

- Now home to five ski-industry companies, Ogden City is promoting itself this week at the annual SnowSports Industries America (SIA) trade show in Las Vegas. (SL Tribune) (Standard-Examiner)

2006 Outlook Good for Utah

- Inflation bid a quiet adieu to what was a raucous 2005, rankled by high energy prices, war and wild weather. And early 2006 data indicate another strong year for Utah, a Wells Fargo economist said. (Morning News)

Construction Forecast Good for 2006

- Construction levels should remain steady in Utah during 2006 due to the state’s “fundamentally sound” economy said industry forecasters. (Utah Business Magazine)

Missile Contract Flies Utah Company’s Way

- Utah's ATK/Thiokol is flying high after receiving a new U.S. Air Force contract that allows it to continue to update and replace the aging motors on the nation's last remaining land-based strategic missile system. (SL Tribune)

17,000 Room Nights Booked in Davis County: $4.9 M Impact from Tourism

- Just how much difference do all those visitors for conferences and conventions make to Davis County? “Definite bookings” of 17,000 room nights translates into just under $4.9 million in economic impact, those attending a recent 2005 Year-End Report and Celebration of the Davis Area Convention & Visitors Bureau were told. (Clipper)

Utah Companies Get Go-Ahead for Oil Shale Research

- A pair of Utah energy companies were among a group of six businesses nominated by the Bureau of Land Management on Tuesday to participate in an oil shale research and development program that could determine if the resource can be extracted in a cost-effective and environmentally acceptable way. (SL Tribune)

Mervyns Set to Exit Utah?

- Department store chain Mervyns, which is closing its downtown Crossroads Plaza store in March, probably will close its six remaining Utah stores, as well, commercial brokers say. (SL Tribune) (Morning News)

Federated to Consolidate Distribution Centers

- Federated Department Stores, Inc. announced it will close five distribution centers in 2006, including a Salt Lake City center, as part of a nationwide consolidation of its distribution center network to maintain efficiency and reduce duplication as it realigns its Macy's operating divisions, as previously announced. (Utah Business Magazine)

FundingUtah.com to Hold 2nd Speedpitching Event

- FundingUtah.com’s second speedpitching event will feature 10 of Utah’s top entrepreneurs giving five-minute pitches to several groups of accredited angel investors, rotating in a fast-paced, speed-dating style. (Fundinguniverse.com)

Commerce CRG Posts Year-end Report Online


Commerce CRG has posted its year-end report online. The link includes market reports for Salt Lake County, Davis, Weber, Summit, Washington and Utah counties.  Here are some of the findings:

Salt Lake County Investments
  1. Investments in Salt Lake County real estate blew the doors off in 2005, breaking all records and exceeding 1.5 billion.
  2. Out-of-state and institutional investors have a renewed interest in investing here. No sign of this changing in 2006.
  3. Salt Lake County's potential for investment is only beginning to be realized. There isn't enough real estate to meet the demand of investors.
Salt Lake County Retail
  1. In retail, the local market remains stable, despite a wave of closures by national tenants.
  2. The retail vacancy rate, excluding regional malls where owners sharply increased vacancy rate intentionally in preparation of planned redevelopment, increased by 0.64%.
  3. Retail lease rates have leveled off after reaching record heights earlier in the year.
Salt Lake County Industrial Market Trends
  1. For the first time since 2002, Salt Lake County is seeing construction in the industrial market. It has turned the corner into a full recovery.
  2. In Salt Lake County, large scale speculative industrial construction returned to the marketplace in 2005. Lease rates are on the road to recovery.
  3. In 2005 there was a surge in industrial land sales. Market activity has been dominated by larger transactions.
  4. The value of industrial buildings continued to rise - due to the lack of available quality buildings and the higher cost of new construction.
  5. Developers are pursuing significant big box projects for the first time in four years.
  6. The market is so active that an occupancy decline into the six percent range by mid-2006 is not unrealistic (currently at 7.27% in fourth quarter - Salt Lake County).